Bad Times at Borders

continued

Analysts who follow Borders Group are divided on its prospects. In recent conference calls with Jones and other Borders executives, they've asked how sales are holding up, how much revenue is being lost in music sales, and how long it will take the new borders.com website to become profitable (it is projected to break even this year and make money in 2009). But some investors remain enthusiastic.

"I wholeheartedly believe they have a future as an independent company," says Todd Sullivan, a value investor who owns Borders shares and is a cofounder of wallstnewsletters.com. Jones is "doing all the right things" by investing in a website and in the stores, Sullivan says.

Of course, Sullivan bought his Borders shares near their low of $4 in late March-so his investment has already gained value. Few others can say the same. According to Securities and Exchange Commission filings, Pershing paid $9 to $13 a share for its Borders stake. For that reason alone, Sullivan does not expect the company will be sold anytime soon: at current prices, a sale might cost Pershing half of its investment.